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In my opinion this is a well balanced review by Matt Fernley of...

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    In my opinion this is a well balanced review by Matt Fernley of the over hyped Battery Day - Source LinkedIn

    Tesla Battery Day - some thoughts on implications for Raw Materials

    • Published on September 23, 2020
    Matt Fernley
    Managing Director at Battery Materials Review
    10 articles Following

    There was lots of hype ahead of the Tesla’s Battery Day yesterday and, true to form, Elon Musk didn’t disappoint, with lots of interesting data points and takeaways. The equity markets in Asia and Australia had a first bite at the cherry this morning with a broad sell-off in battery raw materials stocks, especially in lithium and graphite.
    But I think that the market’s misinterpreted the impacts for battery raw materials, so below are my takeaways on the Tesla Battery Day.
    There were clear winners and losers from Tesla’s comments in terms on battery raw materials. For me, this is the order of preference for the materials:

    1) Tesla is targeting 100GWh of internal battery capacity by 2022 and 3TWh (3000GWh) by 2030.
    Just to put that in context, my battery model for the entire industry is forecasting just under 3TWh of battery demand by 2030E. Now, the jury’s still out on what sort of market share Tesla will have at that stage, but in July YTD it has an 18% global share of the market. If that continues to be the case, then Tesla expects the global battery market to be 16.7TWh by 2030. That’s more than FIVE TIMES what I’m currently forecasting and I’m pretty bullish. The raw material requirement for that industry size will be HUGE.
    2) Tesla is looking to reduce the cost of batteries by up to 50%
    Tesla announced a number of strategies to take the cost of batteries down. Its new battery architecture will be 4680 (ie 46mm diameter and 80mm tall) vs its current 2170, which gives a 5x increase in energy, 6x increase in power and 16% increase in range.
    It announced novel cell manufacturing and testing processes which will reduce factory footprint, water and power usage, increasing profitability.
    As noted above, it suggested changes to its anode and cathode formulations to reduce costs and improve energy density. It also is targeting Cell-Vehicle Integration (which has also been mentioned by CATL) which will reduce the cost of the battery pack, reduce weight and increase the structural strength and performance of the vehicle.

    3) Tesla is looking to bring battery manufacturing in-house
    Tesla plans to continue to source third party batteries (likely for its existing models) but will produce its own batteries as well, likely for forthcoming models in my view. Producing its own batteries will reduce costs substantially because they're not having to pay a margin to the third party producer.
    4) Tesla looking to build own cathode factory
    Tesla announced plans to build its own cathode factory in North America which should lower its costs and also reduce the number of miles travelled for its battery raw materials. It announced that its new nickel cathode approach uses nickel metal, not nickel sulphate removing a processing step, and that its lithium approach also removes the lithium sulphate intermediate step. This means that material derived from recycling (when it becomes available) can be directly integrated into its cathode manufacturing process.
    5) Tesla looking to build a mine to supply own lithium
    OK, let’s talk about Tesla’s comments about lithium first. The presenters talked about how there was enough lithium in clay in the US to supply the whole of the US EV industry. Catchy, huh?
    But the issue with these elements has never been about the amount of lithium or cobalt or manganese available in the Earth’s crust. There’s plenty of it there. The issue has always been the amount of lithium or cobalt or manganese that’s economically extractable.
    That is the crux of the matter.
    It’s about deposits that are big enough to be mined for a long enough period that supports the investment in building that’s necessary and at a high enough purity or concentration. And there is not a surplus of such occurrences.
    The other issue is uniformity.
    Elon Musk’s processing engineers are chemists, most experienced in working with high purity compounds. When I talk about high purity, I mean above three nines, ie 99.9% purity levels.

    But materials that are dug up from the ground are not pure and, most importantly, they are likely not uniform throughout a deposit. So one area may be rich in iron, another rich in sodium and so on. As a result it is necessary to do a massive amount of drilling on a deposit (I’m talking hundreds of thousands of metres here), not just to understand how large and how deep and what shape the ore body is, but also for grade control. It takes three to five years to drill out a deposit and do the requisite chemical and engineering studies to build a mining operation. Then, on top of that, for a new technology I would recommend a commercial-scale pilot plant. Because what works on a limited basis in a lab often tends to work differently on a commercial scale.
    So let’s be realistic here. Tesla may be able to supply its own lithium from clay deposits in Nevada. But it likely won’t be able to do so until 2025 at the earliest. And even then it would need to add ten times the scale of most lithium hydroxide projects. It’s highly unlikely to happen within a near-term timeframe in my view. And before that Tesla will need to buy lithium from established producers and from developers.

    Some other points
    Recycling:
    Tesla made a big fuss about this but there was some spin as well (who would've thought!). They suggested that a large proportion of raw materials supply could come from recycling going forward but that’s not really likely this decade as it will take until the end of the 2020s before there’s sufficient old EV batteries available to be recycled. Note that the lifetime of an EV battery is 10-15 years and there’s probably of the order of eight million EVs in existence (of which five million have been sold in the last three years). While there are significant amounts of phone and laptop batteries available, these are so tiny as to be irrelevant. Recovery on recycling is c.90% on a commercial scale so some of the material is also lost.
    While battery output continues to grow rapidly it’s possible that an increasing amount of raw materials will be derived from recycling, but it's only likely to be around 20% by the late-2020s. It’s not until battery production gets to a steady state that it can become a truly circular market.

    Raw material investment: Musk ducked a question on this in the Q&A and I’ve got to say Tesla seems like most other OEMS at the moment. I would reference Livent CEO Paul Graves’ Voodoo Economics comment last month – OEMs seem to feel that if they push raw material prices down, companies will still invest. Miners can’t afford to invest at current prices. I discussed the incentive prices required for new investment in the September edition of Battery Materials Review and let’s just say that prices required are considerably higher than current levels. Raw material prices need to go higher to justify investment and, in some cases, considerably higher…

    Matt Fernley is Editor of Battery Materials Review and Head of Research for Westbeck Capital Management’s Volta Fund.
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    Matt Fernley
    Matt Fernley
    Managing Director at Battery Materials Review
    Published • 1d
    10 articlesFollowing
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